DETROIT — Prices of new and used vehicles in the U.S. are expected to notably increase this year amid President Donald Trump’s 25% auto tariffs, according to a new analysis from industry experts at Cox Automotive.
The automotive data and advisory firm expects the levies to add thousands of dollars to the costs of new cars and trucks — imported and domestic — while also driving up used car prices more than previously expected. Those prices increases are expected despite a potential slowdown in sales compared with prior expectations, the firm said.
The new expectations come as the automotive industry responds to Trump’s 25% tariffs on imported vehicles that took effect Thursday, and ahead of additional 25% levies on auto parts that are expected to be implemented by May 3.
“We expect to see declining discounting and then accelerated price increases as the tariffs are passed through and supply tightens, leading to price increases on all types of most new vehicles,” Cox Automotive Chief Economist Jonathan Smoke said during a virtual event Monday. “Over the longer term, we expect production sales to fall, newly used prices to increase, and some models to be eliminated.”
Smoke described the current automotive market as a “roller coaster ride,” as demand ebbs and flows based on the country’s regulatory environment as well as economic uncertainty that’s impacting consumer purchases.
Automakers have responded to the tariffs in a variety of ways. Manufacturers that are mostly domestic, such as Ford Motor and Chrysler parent Stellantis, have announced temporary deals for employee pricing, while others, such as British carmaker Jaguar Land Rover, have ceased U.S. shipments. Hyundai Motor also has said it would not raise prices for at least two months to ease consumer concerns.
Regarding new vehicles, Cox estimates a $6,000 increase to the cost of imported vehicles due to the 25% tariff on non-U.S. assembled vehicles, as well as a $3,600 increase to vehicles assembled in the U.S. due to upcoming 25% tariffs on automotive parts. Those are in addition to $300 to $500 increases as a result of previously announced tariffs on steel and aluminum.
Automakers and suppliers may be able to bear some of the cost increases, but they’re also expected to pass them along to U.S. consumers, according to Wall Street analysts.
While the tariffs do not directly impact used car sales, changes in new vehicle prices, production and demand affect the used car market, which is how the majority of Americans purchase a vehicle.
Cox Automotive expects wholesale prices of used vehicles on its Manheim Used Vehicle Value Index — which tracks prices of used vehicles sold at its U.S. wholesale auctions — to now increase between 2.1% and 2.8% by the end of this year. That compares with a previous estimate of a relatively stable 1.4%.
The average listing price of a used vehicle was about $25,000 as of mid-March, according to Cox, //right?// ahead of a significant sales uptick at the end of the month before potential pricing increases due to tariffs.
Retail prices for consumers traditionally follow changes in wholesale prices, but they have not fallen as quickly as wholesale prices in recent years.
“Expect to see some volatility in pricing over the year,” Jeremy Robb, Cox senior director of economic and industry insights, said during the virtual event. He noted the week after auto tariffs were confirmed might end up being this year’s peak in sales.
The change in used vehicle pricing is expected to remain far less dramatic than the unprecedented increases the auto industry saw during the coronavirus pandemic, according to Cox. Those increases were led by robust consumer demand, low interest rates and a historically low availability in new vehicles due to parts and distribution issues.
Ryan Rohrman, CEO of Indiana-based Rohrman Automotive Group, described the current used vehicle market for dealers as volatile, and even said it’s similar to the disruptions during the global health crisis.
“We’re seeing our wholesale car count really go up, but the problem is we’re not able to get as many cars on the used car side as we’re retailing, and then that’s pushing us to go to the auctions. And that’s pushing the value of the cars at the block up, just like it did during Covid. That’s a scary thing,” said Rohrman, whose company specializes in new vehicle sales and select used cars
While automakers are expected to cut production and some have decided to cease imports to the U.S. amid the tariffs, the actions are not expected to be as radical as they were in the early 2020s because of other market conditions.
“It’s going to reduce the demand for vehicles, and it’s that demand component that I think really keeps the lid on from what we’re likely to see with used vehicle price appreciation,” Smoke said.
